DSCR
FinancingDSCR (Debt Service Coverage Ratio) measures whether a property generates enough income to cover its debt payments. It is the key underwriting metric for DSCR loans — loans that are qualified by the asset’s cashflow, not by the borrower’s personal income, tax returns, or employment.
How it works. DSCR = Net Operating Income ÷ Total Debt Service. A DSCR of 1.0 means the property’s income exactly covers the loan payment. Lenders typically require a DSCR of 1.20 or higher — meaning the property generates 20% more income than needed to cover the mortgage.
| Line item | Amount |
|---|---|
| Monthly gross rent | $3,000 |
| Less vacancy (5%), taxes, insurance, management, reserves | $1,000 |
| Net operating income (monthly) | $2,000 |
| Proposed monthly loan payment (P&I) | $1,600 |
| DSCR | 1.25 ($2,000 ÷ $1,600) |
A DSCR of 1.25 means the property clears the lender’s threshold. If the same property had a $1,900 payment, DSCR would drop to 1.05 — likely below minimum guidelines.
DSCR loans are ideal for self-employed investors, foreign nationals, and anyone who wants to close in an LLC rather than their personal name. The bank underwrites the deal, not you. No tax returns, no W-2s, no US credit history required.
For a complete breakdown, read DSCR loans explained and see how foreign nationals use them in foreign national real estate loans.